Recognition of theoretical issues in practice

There is no generally agreed theory or conceptual framework for auditing
in the UK or elsewhere for that matter. The only authoritative reference
to general ideas on the values behind the audit process that can be
found in official documents in the UK is in the form of a one-page list of
desirable qualities, The auditors’ code. The code sets out nine fundamental
principles of independent auditing, as follows.

Accountability

Auditors act in the interests of primary stakeholders, while having regard
to the wider public interest. The identity of primary stakeholders is
determined by reference to the statute or agreement requiring an audit:
in the case of companies, the primary stakeholder is the general body of
shareholders.

Integrity

Auditors act with integrity, fulfilling their responsibilities with honesty,
fairness and truthfulness. Confidential information obtained in the course
of the audit is disclosed only when required in the public interest, or by
operation of law.

Objectivity and independence

Auditors are objective. They express opinions independently of the entity
and its directors.

Competence

Auditors act with professional skill, derived from their qualification,
training and practical experience. This demands an understanding
of financial reporting and business issues, together with expertise in
accumulating and assessing the evidence necessary to form an opinion.

Rigour

Auditors approach their work with thoroughness and with an attitude
of professional scepticism. They assess critically the information and
explanations obtained in the course of their work and such additional
evidence as they consider necessary for the purposes of their audit.

Judgement

Auditors apply professional judgement, taking account of materiality in the
context of the matters on which they are reporting. (See Chapter 7 of this
guide for further discussion of materiality.)

Clear communication

Auditors’ reports contain clear expressions of opinion and set out
information necessary for a proper understanding of that opinion.

Association

Auditors allow their reports to be included in documents containing other
information only if they consider that the additional information is not in
conflict with the matters covered by their report and they have no cause to
believe it to be misleading.

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